American Airlines Pilots Seek Raise

DAVID KOENIG On May 4, 2007
Source: The Associated Press

FORT WORTH, Texas
-- American Airlines pilots asked the company Thursday for a 30.5 percent pay raise plus signing bonuses, which union leaders said would make up for pay cuts that the employees accepted in 2003.

The pilots' union put the cost of the raises at $450 million a year and said signing bonuses would be a one-time expense of $400 million. One union official suggested the costs could be met with "fairly minimal" fare increases.

American's parent, AMR Corp., earned $231 million last year, its first profitable year since 2000.

A company spokeswoman said the pilots' proposal had to be balanced against American's labor costs, which she said are higher than those of other carriers.

American's 12,000 pilots - who earn $136,000 a year on average, according to the company - are working under a concession-laden deal that employees approved to keep the airline out of bankruptcy four years ago. That contract, which can be revamped next May, included 23 percent pay cuts.

The company and the Allied Pilots Association began discussing a new contract in September but have made little progress. Union officials said the company has not made a pay proposal, so they decided to jump-start negotiations by going public with their own offer.

The union is seeking a three-year agreement that would also include additional 5 percent raises in the second and third years.

The unusually public offer comes against a backdrop of increasing labor-management tension at the nation's largest airline. Employees have been enraged by stock bonuses given to about 900 managers last month.

Unions estimate the value of the bonuses at more than $160 million. The company has disclosed multimillion-dollar payouts to a handful of top executives.

The bonuses were a reward for an increase in AMR's stock price, but union leaders say it was employee concessions that made the company's recovery possible.

Drew Keith, a former banker hired by the union to analyze airline industry finances, said a 30.5 percent raise next year would return the pilots' purchasing power back to pre-2003 levels.

The union is also asking for a signing bonus of 15 percent of pilots' wages from last July, when American announced it would reopen negotiations a year early, until a deal is signed.

Union officials also said they expect to seek additional "variable compensation," such as stock options. American's employees got stock options in 2003.

Ralph Hunter, the union president, said AMR shareholders and executives have already benefited from the airline's turnaround. "It is time for our pilots to begin doing the same," he said.

Sue Gordon, a spokeswoman for Fort Worth-based American, said the company realizes that pilots are concerned about getting competitive compensation.

But, she said in a statement, "It's common knowledge that we have a considerable labor cost disadvantage compared to other airlines, so we'll need to balance any proposal that affects our competitive position against this fact."

Although their proposal would cost more than AMR's profit for all of last year, union officials said the company could afford the raises. They noted that American overcame high fuel prices to post a profit last year.

"The costs that we're talking about could be absorbed by a ticket price increase of a fairly minimal amount," said a union official, Scott Shankland.

American expects to begin negotiations with mechanics and other ground workers this fall and with flight attendants early next year.

AMR shares fell 20 cents to $26.70 on Thursday. They have traded from $18.78 to $41 in the past 52 weeks.

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